UPDATE 1-Penn West to cut spending in first half of '09

CALGARY, Alberta, Dec 17 (Reuters) - Penn West Energy Trust PWT_u.TO, Canada’s biggest conventional oil and gas income trust, said on Wednesday it plans big cuts to capital spending in the first half of 2009 to deal with weak commodity prices and still-high operating costs.

Penn West did not say by how much it will cut its budget from the C$525 million ($440 million) it spent in the first half of 2008.

It joins a host of companies in the energy industry that have chopped outlays to weather weak oil prices, which have fallen by more than $100 a barrel from record highs this summer of around $147.

“We will be targeting reductions in general and administrative expenses early in 2009 and we will continue to focus on opportunities to reduce operating costs,” the company said in a statement.

It predicted that reduced drilling industry-wide in Western Canada this winter will translate into lower operating costs later in the year.

“Cost reductions in combination with limiting our capital spending in the first half of 2009 will add to our financial flexibility and better position Penn West for potential strategic acquisitions,” the company said.

Penn West also said a package of properties it has for sale has garnered strong interest given falling oil and gas prices and the tight credit market.

It has closed or signed deals to sell assets producing 3,400 barrels of oil equivalent a day for proceeds of C$147 million. It will apply that to bank debt.